Category Archives: Dividend Aristocrats

The Dividend Aristocrats: Where Have All The Bargains Gone? – Seeking Alpha: By now, it should be no secret to anyone that the stock market has been on a nice run of late. Moreover, this Bull Run has conjured up a lot of discussions that might lead one to believe that stocks in general are overvalued. There are even some that want to play the bubble card because they argue that the S&P 500 and/or the Dow Jones Industrial Average are both approaching all-time highs. However, I believe these extremists are confusing value with price.

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Dividend Aristocrats Are Undervalued – Seeking Alpha: Seeking Alpha is a great resource for the everyday investor in great part because of the open source nature of the information it offers. The Seeking Alpha site has only one agenda, and that is to help its readers become better prepared and smarter investors. David Jackson, Seeking Alpha’s founder, recently directed readers to an article titled “New Highs, New Lows, Yield Greed” by David Merkel that he felt was important, and that subsequently generated a lively comment thread.

Often, the comment threads that a Seeking Alpha article instigates can be of greater value than the article itself. I feel that this was the case with the above-referenced article. The following excerpt from one of David Jackson’s comments in the article corroborates my introductory remarks:

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Newsflash: The Dividend Aristocrats Found The Lost Decade – Seeking Alpha: There are many people who continue to hold a jaundiced view of stocks because they were traumatized by the last two recessions. Precipitous drops in equity prices drove them to distrust stocks and stock markets. However, I believe that most of the negative sentiment is a function of what I would describe as vague ideas about what really happened. A lot has to do with many investors failing to recognize, or make the important distinctions, that were the true causes of our last two market crashes.

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47 Dividend Hikes Expected By The End Of November – Seeking Alpha: In compiling the Dividend Champions list (found here) I get to see which companies are nearing the anniversaries of their previous dividend increases. Since most of these firms raise their payout about the same time every year, I can say with some confidence that they are likely to do so again.

Beyond Thanksgiving

In recent articles in this series, I have shown companies expected to increase their dividends soon, up to 10 weeks ahead of their Ex-Dividend Date. But, as SA Contributor Clay King mentioned in the comments to my previous update (here), McDonald’s (MCD) is expected to announce its next increase in a couple of weeks, more than two months before its Ex-Dividend Date. So I’ve extended the “forward look” to more than 11 weeks for this article, although I will probably return to the 10-week pattern for my next update.

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8 High-Yielding Dividend Aristocrats Not Afraid to Raise Their Dividends

The S&P 500 Dividend Aristocrats is the most recognized list of dividend stocks. The Dividend Aristocrats index is designed to measure the performance of S&P 500 constituents that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years.Dividend Aristocrats exhibit the following characteristics:

– They are a member of the S&P 500– The index is equally weighted with constituents re-weighted quarterly– List is reviewed and updated annually in December

Make no mistake, Dividend Aristocrats are the blue-blood of dividend growth stocks. When building your core portfolio, this list is where you want to start your evaluation. If you want dividend growth, these stocks have been there, and done that – for decades.

This week week, I screened my dividend growth stocks database for Dividend Aristocrats with a yield greater than 3% and have increased their dividends for at least 35 consecutive years. The results are presented below:

Procter & Gamble (PG)Yield: 3.1% | Years of Dividend Growth: 54The Procter & Gamble Company is a leading consumer products company that markets household and personal care products in more than 180 countries.

Pepsico, Inc. (PEP)Yield: 3.1% | Years of Dividend Growth: 39PepsiCo, Inc. is a major international producer of branded beverage and snack food products.

Abbott Laboratories (ABT)Yield: 3.6% | Years of Dividend Growth: 39Abbott Laboratories is a diversified life science company and is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics.

Consolidated Edison, Inc. (ED)Yield: 4.5% | Years of Dividend Growth: 38Consolidated Edison, Inc. is an electric and gas utility holding company that serves parts of New York, New Jersey and Pennsylvania.

Leggett & Platt, Inc. (LEG)Yield: 4.6% | Years of Dividend Growth: 39Leggett & Platt Inc makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as diversified products for non-furnishings markets.

As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.

My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 210+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.

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In our previous article we compiled a list of 21 stocks that form the S&P 500 (SPY) Dividend Aristocrats Index and showed that they have beaten the SPY since the beginning of this year. The S&P 500 Dividend Aristocrats Index tracks the large-cap S&P 500 companies that have increased their dividends for at least 25 consecutive years. Since the beginning of 2011, 42 stocks in the S&P 500 Dividend Aristocrats Index returned 8.8% vs. 6.85% gain for the SPY. (The market data are sourced from Standard & Poors and Fidelity)

We believe investors should be cautious of the upcoming inflationary environment and play more defensively in the near future. We think the Dividend Aristocrats that are able to increase dividends may provide protection against inflation with a better risk-return combination.

Below, we compiled the remaining constituents of the S&P 500 Dividend Aristocrats Index and showed how they have performed this year:

Since the beginning of this year, the average YTD return of these 21 stocks was 9.07% vs. 6.85% for the SPY. All these stocks except LEGhave dividend payout ratio of less than 75%. The average dividend pay-out ratio of those stocks is 42% and the average dividend yield is 2.50%.

Here are the 10 highest dividend yielding stocks in our list:

Pitney Bowes Inc(PBI): Pitney Bowes Inc. is an American company that provides packaging and mailing hardware, software and related services worldwide. PBI has a 6.29% dividend yield but lost 2.47% since the beginning of this year. The stock has a market cap of $4.67B and a P/E ratio of 14.87. Daniel Bubis, John A. Levin, Jim Simons, David Dreman and Phill Gross are prominent PBI investors.

Leggett & Platt(LEG): Leggett & Platt Inc. is an American manufacturer that mainly produces home and office furnishing and industrial materials. LEG has a 4.35% dividend yield and returned 8.95% since the beginning of this year. The stock has a market cap of $3.46B and a P/E ratio of 20.89. Steve Heinz’s Lansdowne Partners had more than $50 Million in LEG at the end of March 2011.

Kimberly-Clark(KMB): Kimberly-Clark is an American corporation producing paper-based personal care products. KMB has a 4.08% dividend yield and returned 7.97% since the beginning of this year. The stock has a market cap of $26.17B and a P/E ratio of 15.14. Ric Dillon’s Diamond Hill had the largest position in KMB among the 300+ funds we are tracking. (Check out Ric Dillon’s top stock picks)

Johnson & Johnson(JNJ): Johnson & Johnson is a US company providing consumer healthcare and pharmaceutical products worldwide. JNJ has a 3.22% dividend yield and returned 11.19% since the beginning of this year. The stock has a market cap of $185.22B and a P/E ratio of 15.32. Warren Buffett holds more than $2 Billion of JNJ. (See Warren Buffett’s other massive holdings) Jim Simons, Ric Dillon, Ken Fisher and Bill Miller are also among JNJ investors.

Procter & Gamble(PG): Procter & Gambleis a large multinational company providing a wide variety of consumer goods worldwide. PG has a 3.03% dividend yield and returned 2.53% since the beginning of this year. The stock has a market cap of $181.24B and a P/E ratio of 17.09. Warren Buffett has the largest position in PG. Phill Gross, Ken Fisher, Ric Dillon and D.E. Shaw also had large PG positions in their portfolios at the end of March.

PepsiCo Inc(PEP): PepsiCo Incis a multinational corporation providing non-alcoholic beverages worldwide. PEP has a 2.77% dividend yield and returned 8.65% since the beginning of this year. The stock has a market cap of $110.54B and a P/E ratio of 18.75.Boykin Curry, Bill Miller and Ric Dillon are prominent PEP investors.

McDonald’s Corp(MCD): McDonald’s Corpis a large fast-food chain operating worldwide. MCD has a 2.77% dividend yield and returned 13.27% since the beginning of this year. The stock has a market cap of $88.82B and a P/E ratio of 18.10.Both Peter J. Eichler Jr. and James Crichton hold more than $150 Million of MCD. Ric Dillon and Jim Simons are also among MCD investors. (See Jim Simons’s favorite stocks)

Wal-Mart Stores(WMT): Wal-Mart Storesis a multinational corporation operating retail store chains worldwide. WMT has a 2.45% dividend yield and returned 1.65% since the beginning of this year. The stock has a market cap of $187.80B and a P/E ratio of 12.55. Warren Buffett had more than $2B of WMT at the end of March 2011.

PPG Industries Inc(PPG): PPG Industries Incis an American manufacturer providing coatings and speciality products to construction, industrial and transportation industries worldwide. PPG has a 2.39% dividend yield and returned 10.96% since the beginning of this year. The stock has a market cap of $14.57B and a P/E ratio of 15.75. Ken Fisher holds more than $600 Million of PPG. (Check out Ken Fisher’s other top holdings)

McGraw-Hill Cos Inc(MHP): McGraw-Hill Cos Inc is a US company providing publishing, broadcasting and media services worldwide. MHP has a 2.25% dividend yield and returned 17.85% since the beginning of this year. The stock has a market cap of $12.91B and a P/E ratio of 15.52. Barry Rosenstein’s Jana Partners holds the largest MHP position among the 300+ funds we are tracking.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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The 2011 Dividend Aristocrats

The S&P 500 Dividend Aristocrats is the most prestigious list of dividend stocks. The Dividend Aristocrats index is designed to measure the performance of S&P 500 constituents that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. This index is a member of the S&P Dividend Aristocrats index series.Dividend Aristocrats constituents exhibit the following characteristics:

Members may be deleted during the December rebalance if calendar-year dividends did not increase from the previous year, or intra-year if the stock is removed from the underlying S&P 500.

On December 2nd, S&P announced changes to the Dividend Aristocrats Index. Standard & Poor’s will perform the annual reconstitution of the S&P 500 Dividend Aristocrats Index after the close of trading on Friday, December 17, 2010.

After last year’s significant decline, it is good see the membership number level off. The previous two years were difficult for dividend stocks, but that is not necessarily a bad thing. During good times it is easy for companies to increase dividends, and many companies were added to the index. It is during times of adversity that we learn who the real aristocrats are.

Full Disclosure: Long MMM, ABT, CLX, KO, JNJ, LLY, MCD, PG, TEG, WMT. See a list of all my income holdings here.

In 2009, I introduced the Stock Ideas list and it has proven to be immensely popular. The list consists of Dividend Aristocrats, US Broad Dividend Achievers and U.S. Dividend Champions. Duplications in the above lists are eliminated and stocks are crossed out when I learn that they have either cut their dividend or fail to raise it. Here is some information on each of the constituent lists and some highlights on this year’s changes:

Dividend Aristocrats: Companies in the S&P 500 that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. As the name denotes, these are the best of the best – the blue blood stocks, including names like:

US Broad Dividend Achievers: Is comprised of companies incorporated in the United States or its territories, trade on the NYSE, NASDAQ or AMEX, and have increased their annual regular dividend payments for the last ten or more consecutive years. Notable names on this list include:

The U.S. Dividend Champions: Is maintained by Dave Fish of MoneyPaper. The list is updated monthly and located at the The Drip Investing Resource Center. Like the Dividend Aristocrats above the Dividend Champions list looks for companies that have increased their dividend for at least 25 consecutive years. However, since S&P 500 membership is not a requirement, the list is larger than the Dividend Aristocrats list and also includes small-cap companies.

Membership in the Stock Ideas list declined in this edition, but it was significantly less than what was experience in the prior year. Overall the number of constituents fell to 198 in the 2011 Stock Ideas list from 218 stocks in the 2010 list. There were 319 stocks in 2009. There were 28 companies that fell off the list, including these prominent stocks:

The news wasn’t all bad. Partially offsetting the 28 companies that fell off the list were 5new companies joining the Dividend Stock Ideas List. Some of these aren’t household names, not yet at least, but here are some names we will likely be seeing in the future: